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'Squeezed and exploited': the new OTA victims

Feb 12, 2018

The big chains have fought back with direct booking campaigns, loyalty tactics and market consolidation, but a report this week from UK-based Sawday's reveals a new challenge facing small independent travel businesses

Back in 2015, when the fight back of the big hotel chains to drive direct bookings started gathering momentum, a question hung in the air. Without the high commissions and restrictive rate parity agreements, which had helped the two biggest online travel agents into a position of duopolistic domination over the hotel industry, could they really survive?

Admittedly, it would be harder, but Expedia and Priceline were hardly going to go down without a fight. One move was to go more aggressively after the smaller chains, and independents, which by some accounts pay higher commissions, than the big chains. This the did. Then, with the growing threat of Airbnb, came the OTAs foray into vacation rentals, which saw Expedia acquire HomeAway in late 2015. Since then, there has been continued disruption and growing competition in the distribution landscape, which many would see as positive. But not everybody is overjoyed.

A report released today by Sawday’s, a UK-based guide to special places to stay Mike Bevens, Managing Director of Sawday’s writes: “We are strong advocates of a healthily competitive market, fairness, level playing fields, honesty and an economy that supports and nurtures the independent business sector.”

But, he, continues: “What’s emerged in recent years in the world of accommodation is anything but – a powerful duopoly of two online travel agents - Expedia and Priceline, that own 80% of the OTA market and in which owners of small, independent businesses reveal they feel increasingly marginalised, treated merely as ‘providers of inventory’”.

The report recognises the important role that OTAs play in securing bookings, but argues that many owners feel increasingly squeezed and exploited, some, even, to the point of quitting.

Unlike the big hotel chains, which ultimately had the brand clout and budgets to fight, smaller fry are in a much more precarious position. Although they recognise the reach that OTAs deliver, it seems that once again the likes of Expedia and booking.com are just not playing ball. Sawday’s research into owners’ relationships, coupled with external research from vacation rental platform Rentivo and the Bed & Breakfast Association, find that businesses are given little option to accept onerous terms and conditions. Among the challenges are restrictive contracts that demand high commissions, discounted prices and ownership of the customer relationship (often owners are barred from communication with their own customer). The search dominance of Google, which favours its biggest advertisers is another troubling issue.

Yes, the OTAs do provide value, which the survey highlights. In the UK, over 80% of self-catering owners use at least one of the major OTAs. The OTAs also provide a useful marketing service for independent businesses, which see these major platforms as an important source of future bookings.

But 49% of owners see them as a necessary evil. One of the biggest issues is that the properties want to maintain the guest relationship. Only 6% of those surveyed wanted OTAs to manage the entire guest booking on their behalf.

6 areas to sustainability

The report identifies six areas that Sawday’s believes need to be addressed to help create a sustainable future for independent travel businesses:

Allowing owners more control over bookings

Quality control and accurate representation

Restoring guest interaction

Treating owners as individuals, not a commodity

Establishing fairer payment terms

Lowering costs, considering the profitability of businesses and the need to reinvest

Sawday’s properties are carefully selected hotels, guesthouses and self-catering properties that are considered truly authentic and ‘special’ places to stay. To date, the model has been that users pay a nominal yearly fee, but based on this recent research, Sawday’s has recognised that it needs to move with the times. As a result, it will be trialling a commission-based model, which it claims will be “simple, ethical and transparent” and will work for both owners and guests.

Says Bevens: “If we want to allow independent travel businesses to thrive and to create a sustainable future, the challenge to the industry is to readdress the balance, giving owners back some ownership of the booking process and experience, while allowing them to reach the audiences they need and want, at a price that’s fair and on a level playing field.”